Examining the Impact of Enhanced Trader Competition on Small Herders: Empirical Findings From China's Pastoral Region

ABSTRACT This study empirically examines the impact of increased competition among commute traders on the performance of herders in a less competitive livestock market. To achieve this, we conducted a field survey and collected data on 669 households from 104 villages in the pastoral area of China. An instrument variable approach was employed to mitigate potential endogeneity concerns associated with trader competition. The results indicate an inverted U‐shaped relationship between farm‐gate prices received by herders and the intensity of trader competition. These positive effects can be attributed to the increased information that herders acquire regarding their livestock's quantity and quality due to more frequent interactions with traders. However, the abundance of information may lead to excessive patience among herders, driving them to seek higher prices and potentially causing them to miss out on optimal offers. The results suggest an essential role of increased competition from traders in improving the market gain of small farmers in developing regions.